Posts about Business

I see that the $2.4 billion settlement of the stupidest merger in history is for only those who were stupid enough to buy the stock between 1999 and 2002, not the poor shmucks (like me) who owned the stock and didn’t sell it because the jackasses lied about the value of AOHell.

A law firm representing the lead plaintiff group announced separately that the settlement with their group, which amounts to $2.4 billion, will benefit shareholders who bought shares of AOL or Time Warner between Jan. 27, 1999, and Aug. 27, 2002. The accounting firm Ernst & Young has also agreed to pay $100 million.

The settlement deal must still be approved in court. The company also set aside another $600 million to settle other remaining shareholder litigation.

I’m pissed. Can you tell? That damned Time Warner stock was my FU money and it F’ed me.

I’ve been thinking about TV Guide and why its drastic overhaul didn’t/couldn’t happen when it should have, 10 years ago — and why similar drastic strategic changes are not happening at other publishing companies today.

It’s because they are cash cows.

TV Guide brought in a helluva lot of cash; it was No. 1 in ad pages, and each page was golden. When I was there, I developed a new magazine, the Parents’ Guide to Children’s Entertainment, because I believed the company had to expand its guide franchise and diversify and because I thought it was a helluva good idea and was needed (it was). We sold 400,000 copies in only two weeks on the newsstand with no promotion but the project was killed. Why? It wasn’t worth the time of TV Guide ad reps to sell $8k pages when they could be selling $80k pages in the main mag. Now the answer to that, of course, would have been to invest in the new products with new staff. But when you work on a cash cow, executives don’t want to spend time raising calves; things need to be big to compete for attention and pay for the big infrastructure. And new = risk. So new things don’t start.

And the answer to the creeping shrinking of the main mag would have been to make radical changes in the product: gutsy changes like the ones TV Guide just made to not only update the product but also cut costs. Some argued in favor of making those changes when I was there, me among them. But inertia and fear and politics and cash won. Strategy didn’t.

Having a cash cow distracts companies from the future. It makes them complacent: ‘Look at all the money (still) rolling in.’ It makes them think that if they just tweak this and that — if they can still get away with raising their rates even as their audience and value are shrinking — they will continue to keep milking cash from that old cow. It makes them overly cautious: ‘Nobody hurt Bessie!’

And politically, the guys in charge of the cow don’t want anybody inside the company competing with them: no new products, no new power centers, no one else to set strategy, no one else to use resources. They win because, of course, they’re the ones bringing in the cash. Nevermind that they’re the ones stopping the company from building for the future. They’ll tell you that’s not their job. They’re there to protect the cow.

Jay Rosen argued in his post about laying newspapers down to die that it is also about draining the value of a company as it declines. In some cases, that’s true. But in some, there isn’t such a sinister or cynical motive; it’s more about blindness, wilfull blindness.

As in the case of TV Guide, change will finally come, but only when it is inevitable, and perhaps when it is too late.

: And that, ladies and gentlemen, is a picture of what life is like in many other big media companies today. That is what is happening on shrinking newspapers, and in shrinking broadcast and even cable networks, and in many a shrinking magazines.

The cash cowherds run the farm, change is resisted, strategic bravery is rarely seen. Why? They still make a lot of money. Yes, but they aren’t growing, not in real terms.

And, worse, the world has changed in this decade in profound ways. There is an entirely new medium competing for attention and dollars. This new medium has devalued what you thought was your core asset — your stranglehold on distribution, your size — and made them into burdens rather than advantages. Your customers, once just a mass, can now talk back and complain. And, most important, in a world where small is the new big, a million small competitors are now enabled to chomp away at your audience, your franchise, your brand, your business, your cash.

Other media companies should look at TV Guide’s saga as instructive and predictive: What happened to the magazine that once sold more copies every year than any other magazine can happen to you.

In Technology Review, Craig Newmark writes about his list and his view of customer service. As I think I’ve said here before, I’ve heard Craig introduce himself at more than one event as the guy who does customer service and that always gets a laugh but it is no joke. Customer service is the highest ethic of his venture. It is the highest ethic of open source. It is the highest ethic of a true community. If newspapers… and Dell… and AOL… and government remembered that customer service is their job, they’d be a lot more successful than they are.

My title at craigslist is “customer service rep and founder,” and my customer service role is at least a full-time gig. A CEO runs the actual organization now. I’ve always had difficulty articulating why I have this obsession. I work anywhere from two to ten hours a day, seven days a week, doing stuff like deleting “bait and switch” posts from New York apartment brokers, moderating discussion boards, and sharing community suggestions with the team. If you e-mail me about the site, I’ll probably write back–quickly, too….

I figure that reasonably good customer service is part of the social contract between producer and consumer. In general, if you’re going to do something, you should follow through and not screw around. As a nerd, I have the tendency to take things pretty seriously, so if I commit to something, I try really hard to stay committed.

This isn’t altruism or social activism; it’s just giving people a break….

Also, I’ve learned from the open-source movement that people want to contribute to endeavors of mutual benefit. So at craigslist, we’ve turned over a lot of control over the site to the people who use it. We seriously listen to suggestions and actually change the site in response to them….

I feel that all this is a deep expression of democratic values. From a business point of view, of course, it makes good sense, too: it lowers our costs and improves the quality of what’s on our site. Finally, it helps keep management in touch with what’s real–or at least that’s what we hope.

Unfortunately, in contemporary corporate culture, customer service is often an afterthought, given lip service only. This seems to be part of the general dysfunction of large organizations. As a company accumulates power and money, the people who are skilled at corporate politics take control of it. Customer service never seems to be highly prized by people with those skills. Maybe it’s because they lack empathy.

The key to customer service is not treating people like customers but like people. I’ve said this here before, too: When I worked for small papers in places like Burlington, Iowa, I talked with people who read what I wrote. When I went to work for big papers, I lost that connection and saw readers as people who wrote letters with crayons and tongues stuck out. That separation ruined me as a customer service representative in journalism until I got back into the conversation at eye level via blogs, where we’re each others’ customers.

Last month, I wrote that small is the new big. More demonstration of it: eBay is fast becoming one of the largest employers in America. Of course, it hardly employs anyone, but it enables a lot of people to employ themselves and run their own businesses: 724,000 people are using it as their full- or part-time employment, up 68 percent from a year go; another 1.5 million use it to supplement their income. Walmart is America’s largest employer with 1.1 million workers. Sure, the eBay-self-employed don’t have Walmart’s crappy benefits and uniforms (if eBay were really smart, they’d institute group health insurance!) but all those folks are their own bosses. As industry gets bigger and bigger, small becomes more and more of an economic force.

: See Rex Hammock in the comments on eBay’s power seller health insurance and the regulatory issues around it.

The AP reports that the number of legal music downloads has tripled in the first half of 2005. I’d say that’s good news. I’d say that’s because, thanks to Apple, the industry finally found a way to help people do what they want to do: listen to music wherever they want. I’d say it indicates that if you give people the chance to do the right thing, they will. I’d say it’s a good sign for humankind.

But the music industry doesn’t say that. The music industry treats its customers like thieves and idiots:

The International Federation of Phonographic Industries… credited the increase to a 13 percent rise in the number of broadband lines installed around the world, along with an industry campaign to both prosecute and educate against illegal downloading.